Medicare Funding for Graduate Medical Education



August 21, 1998 98-R-1057

FROM: John Kasprak, Senior Attorney

RE: Medicare Funding for Graduate Medical Education

You asked for information on the Medicare program’s role in funding graduate medical education (GME).

SUMMARY

According to a recent U.S. General Accounting Office (GAO) report, about 1,200 hospitals in the country have graduate medical education (GME) programs for training physicians in medical specialties after they complete medical school. Residents in these “teaching hospitals” receive specialized training and provide patient care under the supervision of a teaching physician. Teaching physicians are faculty members who train and supervise residents by providing classroom instruction, making rounds with residents, examining specific patients, and discussing courses of treatment.

Medicare covers almost all people aged 65 and over and certain disabled individuals. Medicare is administered by the federal Health Care Financing Administration (HCFA) and has two basic parts--hospital insurance (Part A) and supplementary medical insurance (Part B). Part A covers inpatient hospital services, home health services, and certain other institutionally-based services. Part B covers physician services, outpatient services, and various other medical and health services.

Medicare pays teaching hospitals for part of the costs of graduate medical education under Part A. Such payments are meant to cover a portion of teaching physicians’ salaries related to the time they spend teaching residents. Medicare Part A also pays a portion of the residents’ salaries. In federal fiscal year l996, Medicare paid about $6.5 billion in federal funds to teaching hospitals for costs associated with the training of physicians and allied health personnel.

Medicare Part B funds also contribute to the training of physicians. Teaching physicians can receive Medicare Part B funds when they personally provide services to Medicare beneficiaries and, in some cases, when a resident provides services under the personal supervision of the teaching physician. Physicians claim Part B reimbursement through use of various codes which indicate the level of care provided. Generally, the higher the code the higher the degree and complexity of the level of services provided, and the higher the Medicare reimbursement.

These two methods of paying teaching physicians have raised concerns with the federal government for fear that Medicare will pay twice for the same service--once as a Part A hospital payment, and again as a separately-billed service under Part B. Some teaching hospitals have undergone “Physicians at Teaching Hospitals (PATH) Audits,” conducted by the federal Department of Health and Human Services (HHS). Teaching hospitals and related organizations have raised questions about the appropriateness of these audits. But the GAO found in its recent report that the federal government does have a legal basis for conducting these audits on teaching hospitals. GAO did raise questions, however, about the institutions selected for audits.

HISTORY OF MEDICARE PAYMENTS FOR GME

Just after the Medicare program was created in l966, the federal government adopted rules establishing principles of reimbursement for services by hospital-based physicians. One principle was that services may be reimbursed under Medicare Part B if the physician provided an “identifiable service requiring performance by a physician in person.” The next year (l967), the Medicare program adopted rules specifically addressing the reimbursement of attending physicians’ services provided in a teaching setting. Specifically, payment was authorized where the “physician provides personal and identifiable direction to interns or residents who are participating in the care of his patient” (see Medicare: Concerns With Physicians at Teaching Hospitals (PATH) Audits, U.S. General Accounting Office, GAO/HEHS 98-174, July 23, l998, p.9).

In l969, Medicare issued specific guidance establishing conditions for Part B payments to supervising physicians in a teaching setting (Bureau of Health Insurance, Intermediary Letter No. 372, “IL-372”). Under this, a teaching physician, in order to be reimbursed under Part B, had to be the patient’s “attending physician.” To be that, the physician had to “render sufficient personal and identifiable medical services to the Medicare beneficiary to exercise full, personal control over the management of the portion of the case for which a charge can be recognized” (GAO report, p.9). To exercise such control, the teaching physician had to either actually perform the needed services or supervise the treatment provided by others to ensure appropriate and quality care were given.

The U.S. Congress passed a law in l980 concerning carrier documentation requirements for Part B payments for teaching physician services. Similar to IL-372, the statute provides that “a carrier shall not pay for physicians’ services provided to patients under an approved teaching program unless the physician renders sufficient personal and identifiable physicians' services to the patient to exercise full, personal control over the management of the portion of the care for which payment is sought” (GAO, p.9).

In l986, another GAO report concluded that a teaching physician's claim for Part B reimbursement required documentation in the patient's medical records that the teaching physician either personally provided the service or was present when the service was provided by a resident. At the time, GAO recommended that HCFA adopt rules to clarify the issue, finding that HCFA had not adequately communicated these documentation requirements to providers. Also, the GAO found that documentation requirements varied significantly around the country.

HCFA did not promulgate rules on this matter until late l995. In the preamble to these rules, HCFA stated “that while IL-372 and related issuances specifically stated that the attending physician had to be present when a major surgical procedure or a complex or dangerous medical procedure was performed, the guidance was vague, perhaps unnecessarily, on the matter of the presence of the physician during other occasions of inpatient service” (GAO, pp.10-11).

PHYSICIANS AT TEACHING HOSPITALS (PATH) AUDITS

In December l995, the University of Pennsylvania, without admitting wrongdoing, entered into a voluntary agreement with the Department of Justice (DOJ) and agreed to pay almost $30 million in disputed billings and damages concerning Medicare billings by teaching physicians. The settlement resulted from an audit done by the Office of Inspector General (OIG) in HHS. OIG had concluded that some of the university's teaching physicians had inappropriately billed Medicare because the medical records did not adequately document their involvement in services provided by residents. The audit also determined that some teaching physicians had “upcoded” their claims; they had billed for more complex and thus more expensive services than may have been provided (GAO report, p. 3).

Because of a concern that such problems might be more widespread, OIG in HHS, in cooperation with the Justice Department, began a nationwide initiative (PATH audits) to review teaching physicians compliance with Medicare billing rules. As of April 30, l998, five additional PATH audits had been resolved (GAO, p. 3). At present, PATH audits are either planned at or in progress at 37 other institutions.

PATH has been controversial, with the academic medical community in disagreement with HHS and its inspector general's office concerning billing and documentation standards in effect over the period under review. In October l997, the Association of American Medical Colleges (AAMC) and other medical associations, specialty societies and medical schools, filed a complaint in federal district court (Central District of California) seeking to end PATH. This suit was dismissed in April of this year for lack of jurisdiction because no actual enforcement action was being challenged. Another lawsuit, filed by the Greater New York Hospital Association and several New York medical schools, is pending.

JK:tjo

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